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More ResCap Layoffs

Company announces 3,000 job cuts

October 17, 2007 (updated 1 p.m.)

By MortgageDaily.com staff

Residential Capital LLC will layoff thousands of employees on top of the thousands of job cuts it has already made this year.

In April, the Minneapolis-based lender disclosed it would eliminate 1,000 positions, noting at the time that the decision was "influenced by current market conditions, including a smaller U.S. residential real estate finance market, the deterioration of the subprime mortgage market, shifts in home prices and appreciation rates, and a challenging interest rate environment."

In January, the company reported it would layoff 800 employees through October and not fill 200 open mortgage job positions as part of a cost cutting plan.

Today, the subprime lender announced a 25 percent reduction in its remaining 12,000 workforce. Approximately 3,000 administrative and managerial positions in low producing business units are affected by the layoffs.

Severance packages and outplacement assistance will be given to eligible employees, the statement said.

"ResCap has taken aggressive actions to date and will continue to adjust its operations to be more in line with the dramatically changed real estate finance environment," a ResCap spokesman told MortgageDaily.com today in an e-mail statement. "We are focused on turning around the business and believe ResCap will continue to be a market leader in the mortgage space for the long-term."

Cerberus Capital Management, which has a majority interest in ResCap parent GMAC, has seen its investment in Aegis Mortgage Corp. dissolve as that subprime lender has stopped doing new business. It has also been grappling with a potential acquisition of Option One Mortgage Corp., which may wind up only including servicing operations.

ResCap will take charges ranging from $90 to $110 million relating to a restructuring plan approved Monday, according to today's announcement. Most of the charges will occur in the fourth quarter.

"The mortgage industry continues to experience lower overall origination volumes; illiquidity in the secondary market; and adverse trends in home price appreciation," the press release stated. ResCap "has sharply reduced its exposure to nonprime and prime non-conforming loans this year."

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